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Investing isn鈥檛 just about money; it also involves an emotional aspect for investors. As a result, in tough economic times, financial advisers may find themselves acting more like counselors than money managers.

Consider, for example, that 2008 was the second worst year in stock market history.聽Few portfolios have escaped erosion, although many advisers worked to mitigate the losses. The average balanced fund was off more than 24 percent last year, while the the S&P 500 dropped a meaningful 37 percent.

International markets were down even more.

Emotionally, there is a sense of personal loss that鈥檚 not just on paper. The decline of lifetime savings or investments triggers a flood of emotions that may bubble up old wounds. Sounds a little crazy that a portfolio downturn could trigger the stages of grief much like the loss of someone we love, but it鈥檚 true. All emotions get mixed together.

There are five primary stages of grief, according to psychiatrist Elisabeth Kubler-Ross. I鈥檝e added a sixth to her list. This isn鈥檛 a strict series of timed steps. Instead, it provides a framework or guide to understanding what people feel when faced with loss. Kubler-Ross related the list to the loss associated with death or dying. In the case of this column, I鈥檓 relating it to the loss of losing tangibles such as an investment portfolio decimated by stock market failure or a home destroyed by fire.

Let鈥檚 imagine you and I are facing a market meltdown such as occurred in 2008 and in 2001 when the Twin Towers were destroyed by terrorists.

First, we find ourselves in a state of shock. We ask, 鈥淲hat is happening?鈥� As in any loss, Kubler-Ross鈥檚 model suggests that people pass through their own individual journies. People鈥檚 reactions to any emotional trauma are as individual as snowflakes or fingerprints.

Next comes denial. Many people won鈥檛 鈥� or can鈥檛 鈥� face reality; they hide from it. It is not uncommon for people to decide to ignore the statements, turn off the television and take no action. More than one adviser has heard a client say, 鈥淚 know it鈥檚 bad, so I鈥檓 not going to look.鈥�

Then we move into the anger stage. Statements that slip from lips at this stage run along the lines of: 鈥淭his is wrong and I am angry. Who regulates crooks, anyway, and who do we blame.鈥�

Fourth comes testing or bargaining. Bargaining can be self-talk such as, 鈥淚 like my work and really don鈥檛 need to retire soon. I can spend less and put off buying the new RV until later.鈥�

Next up is a state of depression. In addition to feeling drained and hopeless, self-defeating comments might run along the lines of,聽鈥淭he old plan won鈥檛 work. None of my dreams will come true.鈥�

And finally, we move to place of acceptance. This stage varies depending on each person鈥檚 situation. People come to a point of objectivity and less emotional attachment.

The grief cycle helps us understand reactions 鈥� our own and other people鈥檚 鈥� to personal trauma or change. It is applicable to any loss and teaches that while the cycles may be repeated, in time there is acceptance of reality, which helps us cope.

It is important to understand how emotions affect the way we handle business and personal relationships. Think of it as an equation: Event + Reaction = Outcome. The reaction may be positive, neutral or negative.聽Our memories bank a ton of reactions, and they store up either positives or negatives.

Two people can experience the same event and one will react in a constructive manner, looking for the positives, the ways to learn from the experience. The other may give the event the power over their lives and blaming others for the outcomes.

The best financial advisers care a great deal about people, and that鈥檚 why they, too, are often the most affected in a bad market.聽They feel their clients鈥� pain. They may berate themselves by asking,鈥淗ow could I not see this coming?鈥�

Investors today have to deal with the past 100-year storm and ask for guidance looking forward.聽Tell your adviser what you expect from him or her.

Looking at the past today may be little indication of the future.聽Don鈥檛 avoid communication with your advisers. The dynamics of today鈥檚 markets requires talking through your concerns and getting all the details you need to feel informed.聽Address your expectations and your cash flow needs. Take charge of your financial future.

Judith A. McGee is the chairman and chief executive officer of McGee Financial Strategies, Inc., an independent registered investment advisor. She is a branch manager of, and offers securities through, Raymond James Financial Services, Inc. in Portland. Contact her at 503-597-2222 or [email protected].